As pot stocks explode in hopes of legalization in the United States, Canadian cannabis companies struggle for growth

Only Canadian pot companies trade publicly on major U.S. exchanges, and three of those companies released quarterly results Monday amid stock gains of 30% to 150% since the opening Thursday. Only one, Canopy Growth Corp. CGC,
+ 4.59%

CANNABIS,
+ 4.44%,
was able to post significantly higher sales compared to last year, despite the opening of the Canadian market to new products such as edibles and vapes.

Canopy is the largest cannabis company measured by market capitalization, thanks to a $ 4 billion investment from beer brewer Corona Constellation Brands Inc STZ,
+ 8.05%.
It is also the only Canadian company to have agreed to acquire an American multi-state operator, the largest of the pot companies in the United States, as it operates in several legal states, through its agreement with Acreage Holdings. ACRHF,
+ 1.30%

ACRDF,
+ 3.85%.

“We are excited about the prospects of participating in the US THC market, and we have already developed an American ecosystem that positions us well as [a] hemp and cannabis, when, not if, US permission occurs, ”CEO David Klein said on a conference call Monday.

Klein said Biden’s victory was an “important step on the road to federal permissibility of cannabis in the U.S. market through decriminalization and the withdrawal of schedules,” and praised the results of voting initiatives last week that saw four other states legalize cannabis for adult use – New Jersey, Arizona, Montana, and South Dakota. Klein said neighboring states would come under pressure to legalize to avoid losing taxes, specifically mentioning Pennsylvania and New York, and Tilray Inc. TLRY,
+ 4.88%
General manager Brendan Kennedy suggested the same on a conference call later today while adding Connecticut to his list.

Lily:With Election Day sweep in four states, sales of recreational pots will soon reach one-third of Americans

Canopy has also launched CBD brands with Martha Stewart in the United States and aims to become a large cannabis-focused CPG company, Klein said. Canopy posted narrower-than-expected loss and earnings that topped estimates, and its inventory rose 4.6% to $ 24.58, the highest close since January.

Aurora Cannabis Inc. ACB,
+ 14.50%

ACB,
+ 14.90%
gave a much more chaotic take on the current state of the cannabis industry, after the investment boom following Canadian decriminalization failed amid financial reality. Aurora recorded a loss of over C $ 100 million for the first quarter of the fiscal year after losing more than C $ 3 billion the previous year, and sales fell to C $ 67.8 million from 73.7 million Canadian dollars.

That wasn’t a big deal for the Aurora stock, which had already doubled in trading on Thursday and Friday. The shares gained another 14.9% Monday to $ 14.65.

As Canopy praised their CBD deal with Martha Stewart, Aurora revealed that she paid $ 40 million to end a similar deal with the UFC. The companies had joined forces to advance clinical research on CBD products and athlete well-being last summer with fanfare, a deal that was to last eight years when struck by the then CEO, Terry Booth, but that led to canceled events and a big payout.

See also:Canadian cannabis company agrees to buy US craft beer maker Sweetwater, known for its 420 brand beers

CBD has been the preferred route into the U.S. market for Canadian cannabis companies looking for early entry. Aurora achieved its long-promised plunge into the U.S. market with an acquisition of CBD earlier this year, after Tilray bought a large hemp company with an eye on the CBD market almost a year earlier.

Tilray declared profit after Monday’s bell and produced the closest profit result of the three, with losses of 2 cents per share and fourth quarter adjusted profit promises. Sales barely budged from last year, but executives blamed it on bulk sales last year as the company stopped focusing on its core business. Tilray stock gained 6.6% after-hours trading after the results were released on Monday, having gained more than 80% in the previous three sessions.

All three companies have focused on their cost-cutting capabilities, particularly in general and administrative costs, after overspending during the days of high stock prices – as well as the COVID-19 pandemic – carried the investors’ eyes on liquidity and burn rates. Aurora’s newly installed CEO Miguel Martin proclaimed his company had “the biggest reduction in general and administrative costs of any Canadian producer,” and other companies have sought to challenge him.

See:Attorney General Barr Ordered Antitrust Investigations In 10 Cannabis Mergers Because He Dislikes Industry, Attorney Says

Importantly, our end-to-end review identified savings opportunities in the order of $ 150-200 million in cost of goods sold, general and administrative expenses, and inventory, and efforts are underway to capture value quickly, ”Canopy Chief said financial agent Mike Lee.

“We have reduced our quarterly SG&A, including R&D, from about $ 48 million in the fourth quarter of 2019 to about $ 26 million in the last two quarters, a remarkable improvement over a short period of time,” said Kennedy.